Insurance still isn't an easily understood product, so most buyers prefer to engage with a skilled intermediary to make sure they are fully covered and have their claims handled properly. (Shutterstock)
One of my very first articles as a reporter for National Underwriter nearly 40 years ago was about how industry analysts were predicting that direct to consumer sales bolstered by emerging technology would doom most property & casualty insurance agents to the same fate as buggy whip makers and milk men.
Yet today, insurance agents remain the dominant distribution channel in most lines of business.
The numbers speak for themselves. Agents and brokers of one sort or another still account for 99% of commercial insurance premiums written, according to the "2019 Market Share Report" published by the Independent Insurance Agents and Brokers of America, based on data from A.M. Best. Even in personal lines, where consumers appear to be somewhat more comfortable buying insurance directly from carriers, agents managed to generate 81.7% of premiums, including 93% of homeowners' volume and three out of four dollars paid for private passenger auto policies.
Meanwhile, the number of people employed by U.S. insurance agencies and brokerages has increased 26% over the last decade, from 653,000 in 2009 to about 825,000 last year, according to the Insurance Information Institute, based on data from the U.S. Bureau of Labor Statistics.
Defying the doomsayers
Agents have managed to defy the doomsayers who tried to write them off as an overvalued frictional cost at best and an obsolete anachronism at worst. Even at a time when more and more individuals are shopping on their computers and phones for most goods and services, insurance largely remains an exception in a world of relentless disintermediation.
There is no big secret to the agent's staying power in this increasingly digital, self-service economy. Most insurance consumers would rather surf the web for something they actually look forward to buying and can put to immediate use. In addition, insurance still isn't an easily understood product, so most buyers prefer to engage with a skilled intermediary to make sure they are fully covered and have their claims handled properly.
Bottom line: The money consumers can save shopping on their own may simply not be enough to warrant the time and aggravation involved, let alone the risk of making a mistake and ending up with coverage gaps. This is especially true with small commercial lines, where buyers need multiple policies and an uninsured claim could be catastrophic to a business operating on a thin margin.
However, this doesn't mean agents can afford to rest on their laurels. To retain their market dominance, they will be challenged by carriers and clients to substantially up their games. Fending off inroads by InsurTech disruptors looking to sell direct will only be half the battle. The other half will be keeping up with more innovative legacy agencies that are quick to adopt game-changing advances in technology and adapt to rising customer expectations.
Possibilities for enhanced practices
To remain viable long term, agents should therefore be disrupting their own outdated business practices and integrating many of the same tools and technologies being deployed by those looking to displace them. Consider the following possibilities:
- Going 24/7: Even though most consumers of personal and small business lines appear to still prefer a human component in their insurance transactions, many have become accustomed to immediate gratification at their convenience, including nights and weekends. To satisfy such demands, agencies need to have a robust web page and mobile app with intuitive self-service options, giving customers direct access to coverage information, first notice of loss capability, and claims status, at a minimum. Having the option of contacting a live person via phone or text, like a doctor with a service to reach them in case of an emergency, might be wise to retain an agent's key competitive advantage—their customer-centricity.
- Going virtual: While several Insurtechs have emerged that seek to displace agents with automated, algorithm-driven online shopping platforms, others have acknowledged facts on the ground by serving as virtual wholesalers and incorporating legacy retail producers into their business models. Joining such platforms can extend an agency's market reach among those who may want to window shop for insurance online, yet might still be convinced to opt for an expert intermediary who can get them adequate coverage at a competitive price, while providing value-added risk management advice and claims support.
- Going electronic: Enabling electronic signatures, policy delivery and proof of insurance certificates can make doing business with brick and mortar agencies much more convenient than asking clients to come to the office or exchange documents over regular mail.
- Getting automated: Chatbots can help agencies refer calls to the proper people or even directly handle routine queries about coverage or claims, setting or confirming appointments, or seeking preliminary information about buying or renewing policies. Automated systems can also help agents determine placement options for new or renewal business before involving a live producer to close the deal with customers.
- Getting advanced analytics: Agencies can tap into big data and artificial intelligence programs to identify new prospects and cross-selling opportunities, pre-populate applications, and assess a client's coverage and risk management needs. This saves agents time and effort, and better prepares them for a face to face (or perhaps virtual) consultation with customers.
Of course, relying too heavily on these technologies may risk disconnecting agents from what differentiates them in the first place — the human connection. But as long as such tools merely supplement direct interaction with consumers, allowing agents to step up in moments that matter to provide the personal touch and assurances only they can offer, I don't see many of them going the way of milk men or buggy whip makers anytime soon.
Former National Underwriter Property & Casualty Editor Sam J. Friedman ([email protected]) is now insurance research leader with Deloitte's Center for Financial Services in New York. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn. These opinions are his own.
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